A few years back before LeEco was heavily in debt, it was a relatively unknown consumer electronics giant in China, but after the company and its founder launched not one, but three different EV projects (Faraday Future, the LeEcoLeSee and Lucid Motors) the firm developed a much higher profile.
But however LeEco’s downward spiral began after unpaid debts that led a Shanghai court to freeze 1.2 billion yuan ($180 million) in assets owned by its subsidiaries, chairman and CEO JiaYueting and his wife, according to various local media reports citing court documents.
LeEco’s fast ascent seems to have been funded by ignoring basic business sense as the company spent far beyond its means and failed to replenish its coffers. The in debt and fallout from its cash crunch continues to widen, scuttling a $2 billion deal to buy U.S. television maker Vizio, and hurting other related ventures. At one point last year, LeEco was so cash-strapped that Jia said he would cut his salary to 15 cents, and the firm has also suffered from layoffs.
LeEco's assets now frozen by the Chinese government, after the heavy debt of the tycoon owner.
— The Telegraff News (@omilosimon) July 16, 2017
The latest financial woes of the conglomerate, which has interests ranging from smart cars to online content, surfaced days after founder and CEO JiaYueting said its cash problems were “far worse than expected” and that billions of dollars in funds raised in recent months were not enough to help it ride out the crunch.
LeEco, which controls smartphone maker Coolpad and its core listed smart TV unit Leshi Internet Information and Technology Corp, has been in debt and battling huge financial pressure since Jia admitted last year the company had expanded too fast and was facing “big company disease”.
In late 2015, CMB agreed a 10 billion yuan loan to LeEco, part of which was used to acquire a stake in Coolpad and was the biggest bank loan to LeEco at the time, financial magazine Caixin said on Monday, citing public information.
This is a personal blow for Mr. Jia, one of China’s most outspoken technology figures, who in recent years had pledged to challenge American giants like Apple and Tesla. His ambitions propelled LeEco from its start in internet video into a dizzying array of new businesses, including online wine delivery and electric cars. Mr. Jia remains the primary shareholder of Faraday Future, a troubled Los Angeles-based electric car venture with 1,400 employees.